2017 (11) TMI 1875 - HC - Income Tax

Penalty u/s 158 BFA(2) - addition of undisclosed income - HELD THAT - We agree with the opinion of the Tribunal that the addition of undisclosed income was due to determination of income on estimate basis rather than on account of deliberate suppression of income by the respondent. In our opinion, the Tribunal's finding in this regard is proper and sound. The substantial questions of law are, accordingly, answered against the Revenue.

Summary

Issues:
1. Imposition of penalty under Section 158 BFA(2) of the Income Tax Act, 1961.
2. Justification for deleting the penalty imposed under Section 158 BFA(2).
3. Interpretation of provisions of Sec. 158BGA(2) in comparison to Sec. 271(1)(c).

Analysis:
1. The appeal was filed by the Revenue against the Order of the Income Tax Appellate Tribunal, which set aside the penalty of ?1.27 Crores imposed under Section 158 BFA(2) of the Income Tax Act, 1961. The Tribunal based its decision on a search and seizure operation conducted at the premises of the respondent-assessee, where discrepancies in the number of bottles issued and sold were found. The Assessment Officer determined undisclosed income at ?10,20,51,830/- and levied the penalty, which was contested by the respondent.

2. The Commissioner of Income Tax (Appeals) upheld the AO's order, but the Tribunal overturned both decisions. The Tribunal held that the imposition of penalty under Section 158BFA(2) is not mandatory in every case where undisclosed income is determined. Citing judgments from the Rajasthan High Court and Bombay High Court, the Tribunal concluded that penalty cannot be imposed when income is determined on an estimate basis. The Tribunal ruled in favor of the respondent, leading to the deletion of the penalty.

3. The High Court, after considering the arguments presented by the Senior Standing Counsel for the Income Tax Department, agreed with the Tribunal's opinion. The Court found that the addition of undisclosed income was a result of estimation rather than deliberate suppression by the respondent. Relying on the Tribunal's findings and legal precedents, the High Court dismissed the appeal, stating that the substantial questions of law are answered against the Revenue.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalty imposed under Section 158BFA(2) of the Income Tax Act, 1961, emphasizing that penalties are not mandatory in cases of income determined on an estimate basis. The judgment highlights the importance of discretion in penalty imposition and the significance of legal interpretations in tax matters.